Even though I have experience with rentals, trying to do a flip for the 1st time. Got a property under contract in Beverly Chicago. I am just trying to find a good contractor and money lenders..
Purchase at 245k, where properties in the neighborhood sold in the range of 370-400K. The house needs windows, nice kitchen, second floor remodel to add bed/bath, windows, concrete etc.
I really have to get a good estimate on these. Any idea on how to estimate the cost of rehab on this.
I am also considering selling the deal to other people as well.
Well as long as your contract is contingent then you're fine. Getting the contractor in to evaluate what you want done is certainly the next step to help you determine the actual costs. I imagine the costs may be a little bit higher than what you initially estimated but if you offered at 66 cents on the dollar, chances are you have enough buffer to make up any overages. Ultimately a full analysis is what will ensure that this is worth doing once you have all of your costs in.
Best way is to get actual contractor estimates. Request several and then you will know if the deal makes sense. And yes you can also wholesale it, Your end buyer will appreciate that you have all your numbers and can justify why its a deal.
Curious. If you didn't know how much the rehab would be, how did you determine your purchase price? That rehab is not going to be cheap. Have you also estimated all the other costs of a flip?
Curious. If you didn't know how much the rehab would be, how did you determine your purchase price? That rehab is not going to be cheap. Have you also estimated all the other costs of a flip?
I was thinking the same thing. I guess the logic is to get the property under contract and then figure out if it's a good deal. If not then terminate the contract. Not exactly how I would do it but it's a viable strategy. The problem is that if you do this often you might be labeled as a buyer who does not follow through.
I actually used the book about estimating rehabbing costs - plus I have a back ground in commercial construction.
I’m almost done with my first flip and I’d say overall I was within 10% of the total rehab budget. But on certain items I was off by as much as 40% either direction.
I did the general contracting with a partner. I googled prices for cabinets, etc. Also sites like HomeAdvisor will often times have a general price you can use with some renovations. Obviously getting a contractor to give you a firm price is the best way (if you can scope it well enough so you don’t have a ton of change orders).
We also decided to do some work ourselves to cover some unexpected expenses & we got super creative with some ways to cut costs but not quality.
Well as long as your contract is contingent then you're fine. Getting the contractor in to evaluate what you want done is certainly the next step to help you determine the actual costs. I imagine the costs may be a little bit higher than what you initially estimated but if you offered at 66 cents on the dollar, chances are you have enough buffer to make up any overages. Ultimately a full analysis is what will ensure that this is worth doing once you have all of your costs in.
Curious. If you didn't know how much the rehab would be, how did you determine your purchase price? That rehab is not going to be cheap. Have you also estimated all the other costs of a flip?
I was thinking the same thing. I guess the logic is to get the property under contract and then figure out if it's a good deal. If not then terminate the contract. Not exactly how I would do it but it's a viable strategy. The problem is that if you do this often you might be labeled as a buyer who does not follow through.
I would definitely not recommend this strategy of going into a deal without knowing your numbers before hand.
Since this is where you are now @Gani Veer, $30k-$40k sounds low to me, albeit I realize I am from CA and don’t know your market numbers as well as I do here, none the less, it does sound low. Hypothetically, if the rehab was $65k and your purchase was $245k, then an exit value of $395k would get you a tight deal but a deal potentially worth doing.
We were estimating 50k, with about 4 to 5 months holding costs.
Converting into rental is also in the cards. About 2500 in rent
Again, based in the info provided, I don’t think $50k will do it. New investors can almost always count on going over budget by 10% or more as they typically miss items or underestimate the costs. So with that, I would be using a bare minimum of $60k in your analysis for what you have described. The biggest question is, can this property bring a sale price of $395k (or at least $390k) with a high confidence level and you will only know that by running the comps, getting professional opinions, and nailing the finishes and curb appeal of your product.
I am a wholesaler and I need some assistance understanding how to determine the PITI for the holding cost on a Fix and Flip. I am confused because I don't necessarily know what terms or financing type the end buyer will be using. Any insight here?
May I know why you are expecting a 390k or 395k number. Or how do you arrive at that number?
It is possible to arrive at 400k, but the concern is, as a newbie how to get the right finishes at minimizes the cost
I’m not expecting that number, I simply used $390k-$395k as you gave an exit value range of $370k-$400k in your original post.
As far as getting the right finishes without exceeding the budget, that takes, skill, experience, and connections. I would suggest going into every single open house in the area of your subject property and see what finishes they have used. Then equal or better them and ship pricing around for them. As an example, I saw a light fixture in a $2.5M home during an open house, loved it, shopped around for anything similar and found something comparable that was half the cost of what the developer used in the $2.5M home. This is one of many examples. Another could be, most everybody is using granite for their kitchens in your area so you upgrade to quartz stone which only costs you say $200 more per slab but now your finishes are nicer and different (in a good way) than your competition.
Curb appeal, kitchens, and master bed/bath is what sells homes and open floor plans are going to appease the masses over anything else.
I am a wholesaler and I need some assistance understanding how to determine the PITI for the holding cost on a Fix and Flip. I am confused because I don't necessarily know what terms or financing type the end buyer will be using. Any insight here?
Your end buyer’s financing has nothing to do with your holding costs during your rehab flip. If you get a hard money loan at 10% interest, then your debt service costs will be 10% of the borrowed principle amount over the time you hold it. Then you simply calculate your taxes, insurance, utilities, etc and add that in to come up with your total holding costs.
May I know why you are expecting a 390k or 395k number. Or how do you arrive at that number?
It is possible to arrive at 400k, but the concern is, as a newbie how to get the right finishes at minimizes the cost
Have you looked at other comps/flips that are on the market? I’ve done that before to understand what other flippers are doing and then watch how much they are selling for & how long they are on the market. I also try to do something a little nicer - like front landscaping or just slightly nicer flooring to make mine stand out.